Opportunities for Savvy Investors
In today’s digital age, data is instrumental in driving decision making, innovation and competitiveness – leading to the ever-increasing significance of data intelligence. Data intelligence refers to the systematic collation of huge amounts of data (“Big Data”) and analysis of that data to gain intelligent insights as a basis for informed decision making. This analysis and transformation involves integration of cutting-edge technologies such as artificial intelligence (AI) and machine learning tools. The potential for industry and business is enormous and is opening up attractive opportunities for savvy investors.
Key benefits for companies
In today’s fast-paced business environment, it is essential to have access to vast quantities of data and the ability to analyze it, in order to make informed decisions. Being able to make data-driven decisions leads to improved services, faster problem solving and reliable forecasts of future successes/business trends. In short, data intelligence is pivotal in driving growth and enabling businesses to improve performances.
Leveraging AI and machine learning to analyze data and to transform it into actionable information enables businesses to gain a more in-depth overview of their clients and operations. In addition, predictive analytics can help companies look ahead to generate a predictive model to assess future outcomes. In this way, organizations that invest in data intelligence can better navigate the rapidly evolving business landscape – giving them a competitive edge in the market.
Clusters of companies likely to benefit
Cybersecurity companies signaled a slowing of growth in the last quarter of 2022, driven by macroeconomic uncertainty. We anticipate that demand will increase in 2023, triggering a recovery. Companies are stepping up their zero trust security requirements due to growing recognition of cyberattacks as a serious threat to their existence. The area with the largest potential for investment growth is cloud security, which is the top expenditure issue for chief investment officers (CIO) in 2023, according to recent studies on CIO spending by Morgan Stanley.
Software & Applications - According to Morgan Stanley, 47% of CIOs expect IT spending to increase over the next three years, with 45% looking for stable spending. We are positioned in stocks of companies that offer back-office software solutions in disciplines such as accounting, cost management and supply chain management. These companies ought to do better in times of economic slowdowns.
Data & Storage - Demand for data & storage solutions will continue to rise in the coming years on the back of larger amounts of data being produced and processed. Statista predicts that global data volumes will double by 2025. That is likely to benefit big cloud providers.
Data Center, Server & Virtualization companies that manufacture semiconductors and network infrastructure equipment should profit from the increase in investments in new data centers. The big internet companies are signaling larger investments in the next generation of computing capacity to showcase AI/ML applications. Real estate companies that operate data centers will also benefit from investments and we see new opportunities in the smaller modular sites that support edge computing.
Tangible opportunities for investors
Both companies and investors have identified the potential of data intelligence in the world of business. The flow of capital into the technology and companies has increased significantly over the last few years. According to a Deloitte report from 2021, global spending on AI alone is set to reach a global economic value of USD 13 trillion by 2030. Another consulting company, Accenture, put the value at USD 16 trillion with productivity increasing by 26% and production costs down by 40%.
All factors indicate that the current trend is based on robust dynamics – providing investors with a wide range of attractive opportunities.
Against this background, we have launched our Vontobel Data Intelligence Index. The Index comprises a diverse thematic selection of financially robust and reasonably valued companies which derive significant revenues in the fields of Data Security, Computing Power and Big Data/AI. It allows investors to engage in the subject while reducing the risk of excessive investment in overheated stocks. The combination of quality and attractive valuations has proved to be a winning mix in the past, with best-in-class technology stocks commanding a premium. These are also likely to be less volatile since quality tends to outperform in challenging market environments, especially during slowdowns and cyclical recessions.
Sources: Deloitte Insights. Tech Trends 2021, Accenture: Artificial Intelligence Summary Index